In the Hutong
Now that we are into the third month of the year, the time has come for the annual pageantry of pomp, politics, and propaganda colloquially known as “liang hui,” the twin meetings of China’s legislature, the National People’s Congress(NPC), and its advisory auxiliary, the Chinese People’s Political Consultative Conference (CPPCC).
The meetings are met with a fair amount of cynicism, particularly among those of us raised in democracies where, even if our legislators accomplish little more of value than the liang hui, at least they manage to do so without messing up the traffic with thrice-daily motorcades.
Yet while it is not unfair to categorize the NPC and CPPCC as “rubber-stamp” bodies, there are years when it is worth stopping to listen to some of the speeches and taking the time to absorb the coverage. And this year is one of those years.
Here is what we will be listening for in the Hutong:
1. Stability and Harmonious Society: I suspect we will get a healthy dose of this, but what will be worth listening for is specifics on welfare, employment, and social security programs for rural citizens, laid-off factory workers, and retired cadres.
2. Independent Innovation: This little chestnut was pretty hot a few years ago, but has faded into the background as the government faces the darkening horizons of the global economic crisis. While there are more urgent concerns, it will be interesting to see whether this has fallen off the radar, or if any new and significant measures are planned in this area. If the importance of independent innovation has receded, this will imply continued opportunities for foreign innovators, but continued problems defending IPR.
3. Infrastructure: Look for indications on how the central government is going to channel and manage all of the funds for infrastructure investments. I’ll be looking for mentions of specific high-profile projects, a new agency to manage them and their expenditures, and some indication that employment is a focus, not just spending a lot of cash.
4. Financial Sector Reform: In the wake of what has transpired on Wall Street over the past year, it would be hard to justify reshaping China’s financial sector to look like that of the U.S. Nonetheless, China’s banks, insurance companies, bourses, and brokerages face their own challenges after 30 years of rapid growth, and the global financial crisis is a signal that it is time to look for and address problems rather than wallow in schadenfreude.
5. State-Owned Enterprise Reform: Hard times justify hard measures, and it is likely the coming 18 months will see Beijing compelling the restructuring of several industries dominated by state-owned enterprises. The effort will be to strike a balance that will allow for competition while creating national champions through compelled mashups. The auto industry will almost certainly undergo a forced winnowing from 14 passenger car makers to 10 (which I’ll address in a post tomorrow), and we are betting on another round of consolidation in the airline business and the steel industry. The question will be what other sectors will come under the knife, and our ears are perked up for clues.
6. Drought Relief: The environment – specifically air and water pollution – will be a major theme, but a larger problem that looms is the issue of the drought in Northern China. Beyond the general challenges facing rural China, we expect some discussion of water supply, if not in one of the work reports, then in some of the side sessions.
7. Taiwan: For the first time in recent memory, Taiwan is likely to be a feel-good issue at the meetings. A quiet movement is underway in Taipei to build on the newly-established air and sea links between Taiwan and the mainland with what would amount to a free trade agreement. This is a touchy issue in Taiwan, so it will be interesting to see if – and how – Hu Jintao, Wen Jiabao, or any of the other leaders discuss this.
8. Defense: In the wake of Sino-US military discussions and China’s deployment of naval vessels on anti-piracy patrol off of Africa, we will of course be watching for acknowledgement of closer cooperation between the two nations in addressing mutual security issues. More important, however, is whether China’s economic stimulus will extend to spending in “dual-use” industries like aerospace and shipbuilding.
9. Media: I am not expecting 2009 to be a memorable year in reforming and opening China’s media sector: the political sensitivities at the nexus of the global financial crisis and the 60th Anniversary of the founding of the People’s Republic make it far too sensitive. What we will be listening for is any mention of the media sectors at all. I am hoping there will be none: no news is good news here.
10. Peaceful Rise: China made more progress in its strategy of pursuing a “peaceful rise” in its global stature in 2008 than it could have dreamed of a year ago. It will be interesting to hear whether that is sustainable, whether China will allow itself to mirror the US Congress’ protectionist “buy American” rhetoric, or instead will take the high road and position the PRC as the guardian of free trade.
For decades, the Liang Hui have had only needed to address domestic audiences, because they were dismissed by others as ceremonial and ultimately irrelevant. That has changed, and ever since former Premier Zhu Rongji began holding post-Congress press conferences for the global media, China has begun to use the occasion to send messages abroad.
This year the world will be watching the proceedings with greater interest than ever. The leaders must know that, and it will be fascinating to see if anything in the two-week session changes as a result.